Moody’s Sees European Suppliers Recovering Thanks to Increase in Demand and Domestic Growth image

Automotive suppliers in Europe might see an improvement this year thanks to a recovery in the domestic demand for new vehicles and a continuous growth in emerging markets, Moody’s says.

According to Moody’s credit rating agency the industry is expected to see a stable outlook for the next year and a half, due to a rebound in demand for light vehicles and also continuous growth in emerging markets. Moody still believes that free cash flow will “remains a concern” and that there is not much hope for the market to return to positive cash flow in 2014.

The credit rating agency would consider changing the outlook to ‘positive’ if auto market inEuropewill return to a stable path with steady growth, excluding acquisitions, and see an increase of 5%. This increase would also mean solid free cash flow generation for the European automotive suppliers.  On the other hand, outlook would be downgraded to ‘negative’ if stabilization of the auto market in Europe proves to be unsustainable.

The company noted that an increase in demand for light vehicles is of utmost importance for the suppliers’ profitability and growth. Companies that have a broad international expansion, such as Michelin, Autoliv or SKF, should see an organic increase of more than 5% by the end of this year.